Impairment of assets is an accounting term that refers to an asset that has a market value less than the value listed on the companys balance sheet. An asset is considered impaired if its projected future cash flows are less than its current carrying value. Impairment can occur due to materially adverse changes in legal factors, significant changes in the assets market price due to a change in consumer demand, or damage to its physical condition. Impairment is always noted in accounting as a loss, even if the asset continues to perform, since impairment refers to the diminished value of the asset. To calculate the impairment of an asset, take the carrying value of the asset (its historical cost minus accumulated depreciation) and subtract its fair market value. If its fair market value is less than the carrying value, you will need to record an impairment loss for the difference. Impairment losses must be recorded on the companys balance sheet and income statement. Impairment can be temporary or permanent, and permanent impairment losses must be recorded on the companys balance sheet and income statement.